A powerful rally, but worries about earnings growth remain

This is a very powerful rally. The S&P 500 has moved from 1,992 at the bottom two days ago to 2,055, a 3.3 percent move, and is now positive for the year.

The most important catalyst has been modest stability in oil in the last two days, with WTI in the $47-$48 range, as well as more stability in global fixed income.

Other fundamental factors helping have been a series of strong holiday sales reports, with five companies raising guidance: American Eagle (AEO), Aeropostale (ARO), Stage Stores (SSI), Cato (CATO), and Zumiez (ZUMZ) up 8 percent.

Even those that did not raise guidance reported sales better than expected: Barnes and Noble (BKS), sales up 1.7 percent, Pier One (PIR) up 8.2 percent, and Urban Outfitters (URBN) up 4 percent.

There are non-fundamental reasons for the rally as well. Charles Evans of the Chicago Fed—who is now voting member of the FOMC—moved S&P futures 15 points last night when he reiterated that the Fed should not be in a hurry to raise rates.

There has been heavy volume in emerging market ETFs like Turkey (TUR), China (GXC), and India (INP).

Here's what I see:

1) This is the third pullback since September. And each time we keep making new highs, but the amount of time before pullbacks gets shorter. We keep getting these "V" shaped rallies. There is much more volatility, and while that may be fun to cover, not many people are making money.

2) Earnings are starting next week. I see weak growth overseas, a strong dollar, an energy ripple effect, and bond yields much lower than they should be. I see upward revisions in retailers today, which is good news, but it is being dwarfed by the downward revisions in energy.

What's all this mean? It argues for lower earnings growth. Instead of 9 percent to 10 percent earnings growth in the S&P 500, you are looking at maybe 5 percent to 6 percent. Is that bad? No, but it is a deceleration.